WPX Energy is gearing for a $2.5 bn purchase of Felix Energy, a Delaware basin operator based in Denver. The purchase price incorporates US$ 1.6 billion in WPX stock issued to the seller and US$ 900 million cash. The stock incorporates around 153 million WPX shares, based on a ten-day volume-weighted average price as of December 13, 2019. The transaction will be subject to approvals by shareholders and customary closing conditions.
WPX contemplates infusing cash by issuance of US$ 900 million of senior notes on an opportunistic basis. Reportedly, the company has acquired committed financing from Barclays pertaining to transaction and has full access to a revolving credit facility of US$ 1.5 billion.
Apparently, WPX is planning to implement a dividend post-closing, aiming US$ 0.10 per share on an annualized basis at initiation. It is worth noting the highly anticipated acquisition and dividend program is on the heels of business strategies adopted by WPX in 2019 to bolster its value proposition, such as carrying out robust midstream monetization, reducing net debt, generating a free cash flow and initiating a share buyback program.
The acquisition complements five-year vision of WPX for shareholders as the purchase is in line with the all of the principles which the company introduced in Q3 2019 report. Rick Muncrief, Chairman and CEO of WPX, stated the relevance of meeting the five-year targets as it would serve as a touchstone for future investments.
On the basis of pro-forma, the company anticipates generating sizeable free cash flow at $50 oil in 2020. Post acquisitions, the company expects EPS, cash flow per share, return on capital employed, free cash flow per share, and cash margins to surge. Meanwhile, having based all of the transaction economics on US$50 oil, there appears to be no assumptions for enhancements in operating efficiencies or development costs. That said, WPX is of the opinion that capturing synergies linked with scale will bode well for the company.